US to end preferential trade status for India, Turkey

Donald Trump set to open a new front in trade wars with a plan to end preferential trade treatment for India and Turkey.

05 Mar 2019 06:25 GMT

Ending India's participation would be Trump's strongest action against New Delhi since he took office in 2017 [File: Jonathan Ernst/Reuters]

At President Donald Trump's direction, the United States intends to scrap the preferential trade status granted to India and Turkey, the US trade chief's office has said.

Washington "intends to terminate India's and Turkey's designations as beneficiary developing countries under the Generalised System of Preferences (GSP) programme because they no longer comply with the statutory eligibility criteria," the Office of the US Trade Representative said in a statement on Monday.

India has failed to provide assurances that it would allow required market access, while Turkey is "sufficiently economically developed" that it no longer qualifies, the statement said.

Under the GSP programme, "certain products" can enter the US duty-free if countries meet eligibility criteria including "providing the US with equitable and reasonable market access".

India, however, "has implemented a wide array of trade barriers that create serious negative effects on United States commerce," the statement said.

It said Turkey, after being designated a GSP beneficiary in 1975, has meanwhile demonstrated a "higher level of economic development," meaning that it can be "graduated" from the programme.

The changes cannot take effect for at least 60 days following the notification of the US Congress as well as the countries affected - a process Trump began on Monday with letters to the speaker of the House of Representatives and the president of the Senate.

The change for India came after "intensive engagement" between New Delhi and Washington, Trump wrote in one letter, the text of which was released by the White House.

"I will continue to assess whether the government of India is providing equitable and reasonable access to its markets, in accordance with the GSP eligibility criteria," the US president wrote.

In his letter on Turkey, Trump said the country's economy "has grown and diversified," and noted that Istanbul has already "graduated from other developed countries' GSP programmes".

No retaliatory tariffs, says India

India exports $5.6bn worth of goods to the US duty-free, making the South Asian nation the world's largest beneficiary of the GSP programme.

Ending India's participation would be Trump's strongest punitive action against New Delhi since he took office in 2017.

Reacting to the move, a top Indian trade official on Tuesday said New Delhi does not plan to impose retaliatory tariffs on US goods.

Commerce Secretary Anup Wadhawan said the withdrawal of the GSP for Indian products would have limited impact. The two countries had been working on a trade package to address each other's concerns, he said.

New Delhi hoped the planned withdrawal of the preferential trade treatment to India would not lead to trade hurdles, an Indian government source said, adding that the "actual benefit" to India was only $250m a year.

"GSP is more symbolic of the strategic relationship not in value terms," the source told Reuters news agency, declining to be named ahead of a press briefing by the Indian trade ministry.

While New Delhi has played down the impact of the move, India's opposition parties could seize on the issue to embarrass Prime Minister Narendra Modi ahead of general elections due in April and May.

New trade war front after China

The move against India and Turkey comes as the US and China seek to negotiate an exit from a costly trade war that is part of the Trump administration's efforts to address what it views as inequitable commercial relationships with other states.

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Trump has made taking aim at what he considers imbalanced trade relationships a central plank of his presidency - sparking the year-old trade war with Beijing.

The US and China agreed to a 90-day truce to work out their differences, and Beijing and Washington have been edging closer to an agreement in recent weeks.

The truce was scheduled to end on Friday, but Trump lifted the ultimatum to further increase tariffs, satisfied by progress made in several rounds of talks.

Under an agreement taking shape, Beijing would lower some barriers on US companies' operations in China and purchase large amounts of American agricultural and energy goods if the US lowered most of the tariffs in return.